Banks are slowly opening their purse strings to organised retail gold chains such as Joyalukkas, Kalyan Jewellers and others with good credit ratings, but the loan window has remained largely shut for diamond merchants and smaller jewellers, making them gasp for working capital.

“We have a stable rating for our gold business, so we are not facing much of a problem,” said Joy Alukkas, chairman of the Kerala-based jewellery retail chain Joyalukkas. “However, many jewellers from south India are not being able to get new loans unless they have a good rating.”

The overall lending scene, however, remains gloomy ever since the PNB scam called into question banks’ underwriting skills for the jewellery sector and their preparedness to detect fraud. Outstanding bank loans to the gems & jewellery sector dipped 6.3% in the first quarter: the central bank recorded it at Rs 68,100 crore as on June 22 as against Rs 72,700 crore on March 30.

Nitin Khandelwal, chairman, All India Gem & Jewellery Domestic Council, said that despite banks taking stock of the gold inventory they are also pressing for BBB rating before giving working capital to jewellers and bullion dealers. “It is becoming difficult for the medium and small players to get rating for their business,” he said.

India annually consumes around 800-850 tonne of gold. Of this, four southern states -- Andhra Pradesh, Karnataka, Kerala and Tamil Nadu – get about 40% of the country’s overall demand. Courtesy: The Economic Times

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